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Heat Pump Water Heaters: A Comprehensive Guide for Buyers

Here's a "shower thought": have you ever looked up how much energy it takes to heat water? Water heaters make up a sizable portion of a home's energy usage, accounting for about 20% of total consumption. The efficiency of water heaters varies greatly, with some models offering substantial energy savings compared to others.

If you're looking to save up to $5,000 over the next 10-12 years, it's worth considering the switch to a heat pump/hybrid water heater. This buyer's guide provides all the necessary information to help you make an informed decision.

A Brief Introduction to Hybrid Heat Pump Water Heaters

Heat pump water heaters (HPWHs) have gained popularity in the United States for their efficiency. Also known as hybrid water heaters or electric heat pump water heaters, they are widely recognized as the most energy-efficient option. These units operate by extracting heat from the surrounding air to warm the water, eliminating the need for gas or electricity. By switching to a hybrid water heater, homeowners can save between $200 and $600 annually, comparable to the savings achieved by upgrading to a heat pump HVAC system or improving home insulation.

While the initial installation cost of a heat pump water heater is higher than that of an electric or tankless model, the long-term savings justify the investment. This guide covers all the essential aspects to consider before transitioning to a heat pump water heater.

How Heat Pump Water Heaters Work

Heat pump water heaters extract heat from the surrounding air and use it to heat water, operating on the principle of energy transfer rather than energy generation. They function similarly to heat pumps used for space heating and cooling but in reverse. While a refrigerator pulls heat from its interior and releases it into the surrounding area, a heat pump water heater absorbs heat from the air and transfers it, at a higher temperature, to a tank for water heating.

Most modern heat pump water heaters also include an electric coil heater as a backup in case the surrounding air temperature is insufficient. This hybrid functionality is why they are often referred to as hybrid water heaters. To operate effectively, heat pump water heaters require placement in an area where the temperature remains within the range of 40º–90ºF (4.4º–32.2ºC) throughout the year. Additionally, they need ample space of at least 1,000 cubic feet (28.3 cubic meters).

Advantages and Disadvantages of Heat Pump Water Heaters


  • Energy Efficiency: Heat pump water heaters offer the highest energy efficiency among water heaters, second only to solar water heaters. Most models have energy factors of at least 2.0 or above, resulting in significant electricity cost reductions compared to traditional electric water heaters (the typical energy factor of a gas heater is 0.6 and an electric heater is around 0.7-0.9).
  • Environmental Friendliness: Heat pump water heaters have a remarkably low carbon footprint, emitting 2-4 times fewer greenhouse gases than conventional tanks. They are highly regarded by environmental organizations such as the NRDC and RMI.
  • Rebates and Incentives: Purchasing a heat pump water heater makes you eligible for various incentives. The federal government provides a 30% discount up to $2,000 via a tax credit, and states like Maine offer an additional $750 rebate. Major utility companies also offer rebates. Visit the Database of State Incentives for Renewables & Efficiency for more information.


  • Higher Upfront Cost: In locations without incentives, the initial cost of a heat pump water heater can be higher than that of electric or tankless models. The units themselves are often more expensive, and installation is more complex, requiring additional time from a plumber.
  • Minimal Background Noise: Some homeowners report a slight hum when a hybrid heat pump is operating. It is typically no louder than a modern household dishwasher. Placement of the unit in a garage, basement,  or utility room can mitigate this issue. 

Upfront Costs for Heat Pump Water Heaters

The total upfront cost of a heat pump water heater depends on several factors, including the unit's price, installation time, and available incentives.

1. Unit Cost: Hybrid water heaters range in price from $1,200 for a 50-gallon tank to $2,500 for an 80-gallon tank from top manufacturers. The cost primarily depends on the tank size and product quality. You can pay additional money to get a tank with more features.

2. Installation Labor: Professional installation by a plumber takes approximately 6 hours and costs between $600 and $800.

3. Electrician Labor: If you're replacing a gas heater with a heat pump water heater, you may need to hire an electrician to install a 240-volt circuit. That costs between $200-$300.

4. Supplies and Tools: Additional supplies required for the installation, estimated to cost between $150-$220 should be factored into the overall upfront cost.

5. Disposal Cost: While some plumbers charge $25 to $75 for removing old water heaters, many offer this service for free.

Annual Operating Cost 

Running a heat pump water heater depends on factors such as the unit's efficiency rating, energy prices in your area, and hot water usage. To estimate your annual operating cost, consider the following:

1. Energy Factor (EF): The EF represents the amount of electricity required by the heat pump water heater to heat your water. Most heat pumps have an EF of 2, which is 2-3 times more efficient than conventional tanks.

2. Energy Consumption: The average heat pump uses 2,195 kilowatt-hours per year. However, larger tanks will consume more energy. 

3. Energy Cost: Electricity prices vary by location, with the South generally having cheaper rates compared to California or Hawaii. To determine the exact cost, refer to your utility bill or consult the EIA's average electricity price data. In an area where energy costs are higher, a heat pump water heater can be even more cost-efficient.

According to the Department of Energy (DoE), the average operating cost of a heat pump water heater is approximately $225 per year, significantly lower than the $400-800 cost of many conventional tank models. For a family of four, the average annual cost of running a heat pump water heater is $300, compared to $600 for electric storage water heaters, as stated by Energy Star.

Sizing Guide

Choosing the right size for your hybrid water heater is essential to ensure an adequate supply of hot water. Here's a step-by-step guide to determining the appropriate size:

1. First Hour Rating: Evaluate the "first hour rating" of each model under consideration. This rating indicates the amount of hot water the unit can provide before needing to refill and reheat incoming water.

2. Estimate Maximum Hot Water Usage: Calculate the maximum hot water usage within a single hour by considering the flow rates of all end uses, such as showers, faucets, and dishwashers. Add up the gallons per minute (GPM) for all activities occurring simultaneously.

3. Tank Capacity: Once you have determined the total hot water usage, choose a tank size that accommodates your needs. For example, if the estimated usage is 46 gallons, a 50-gallon tank should be sufficient. Keep in mind that larger tanks come with higher costs. Each additional member of your household will require about 10 gallons more of storage size. 

Modifying certain habits, such as running the dishwasher at night or taking shorter showers, can help reduce hot water demand and allow for smaller tank sizes.

Heat Pump Water Heaters vs. Electric

Some homeowners wonder whether the additional cost for an HPWH is justified. Here are the main reasons why investing in a heat pump water heater is worthwhile:

1. Cheaper Operating Costs: Heat pump water heaters offer substantial savings. They are approximately four times more efficient than conventional electric water heaters, resulting in annual savings of $300-400 for the average household. Over 10 years, this equates to savings between $3,000 and $4,000.

2. Longer Warranty: Compared to standard electric water heaters, heat pump models often come with longer warranty periods. For instance, the base Rheem electric water heaters offer a 6-year warranty, while the heat pump variant includes a 10-year warranty.

3. Enhanced Rebates and Incentives: Purchasing a hybrid water heater opens up numerous rebate opportunities. Currently, the federal government provides a tax credit of up to $2,000 or 30% of project costs for heat pump water heater purchases, and some states and utilities offer additional incentives.

4. Lower Carbon Footprint: Heat pump water heaters are highly energy efficient and emit approximately four times less CO2 than traditional electric models, making them a more eco-friendly choice.

Heat Pump Water Heaters vs. Tankless

Many homeowners considering heat pump water heaters also explore tankless water heaters due to their energy efficiency. Here's how the two options compare:

1. More Immediate Capacity: The best heat pump water heaters on the market provide a higher capacity for immediately available hot water compared to tankless water heaters. For example, a 50-gallon heat pump water heater can supply four consecutive showers, whereas low GPM tankless water heaters may struggle to provide hot water for three simultaneous showers.

2. Lower Carbon Footprint: While tankless water heaters are more energy efficient than traditional models, heat pump water heaters still outperform them in terms of environmental impact. Heat pumps emit about half the CO2 (200 kg per year) produced by tankless heaters (400 kg per year), thanks to their heat transfer mechanism.

Heat Pump Water Heater vs. Gas

For most homeowners, heat pump water heaters are a superior choice compared to gas water heaters.

1. Safer and Healthier: Gas appliances, including water heaters and furnaces, contribute to accidental carbon monoxide poisoning incidents and poor air quality. By avoiding the installation of gas-powered equipment, you can significantly reduce the risk of carbon monoxide exposure, which leads to thousands of emergency room visits and fatalities each year.

2. Higher Energy Efficiency and Environmental Friendliness: Heat pump water heaters are the most energy-efficient option available, consuming less energy and emitting fewer greenhouse gas emissions compared to gas water heaters. Given recent spikes in natural gas prices, which are expected to rise up to 50% compared to the previous winter, it's becoming evident that natural gas is an unsustainable fuel source for home energy. Gas water heaters vent gas outside, contributing to carbon dioxide emissions. 

3. Better Rebates and Incentives: Heat pump water heaters often qualify for various rebates and incentives, while gas water heaters have limited rebate options. Currently, the federal government offers up to a $2,000 tax credit for up to 30% off your project costs for heat pump water heater purchases, and some states and utilities provide additional incentives. To explore potential incentives in your area, consult the Database of State Incentives for Renewables & Efficiency.

Installing a New Heat Pump Water Heater

Heat pump water heaters can be installed similarly to standard electric water heaters, as they are more efficient versions of traditional units. In contrast, tankless water heaters are often installed for specific use cases. For instance, they may be chosen when space limitations make it impractical to install a large tank. Depending on your circumstances and budget, it is recommended to install a heat pump water heater for its cost and energy savings. If space or affordability is an issue, a tankless water heater might be a viable alternative.

QuitCarbon offers homeowners a free "Electrification Plan" to guide them in their journey to an energy-efficient home. If you're interested in installing a heat pump water heater and other electric appliances, contact QuitCarbon first. We'll connect you with a network of trusted contractors who will get the job done right.